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    The Lawletter Blog

    CIVIL PROCEDURE: Electing Between Legal and Equitable Remedies

    Posted by Gale Burns on Mon, Dec 1, 2014 @ 13:12 PM

    Paul Ferrer, Senior Attorney, National Legal Research Group

          The Federal Rules of Civil Procedure specifically provide that a plaintiff stating a claim for relief must include in his or her complaint, among other things, "a demand for the relief sought, which may include relief in the alternative or different types of relief." Fed. R. Civ. P. 8(a)(3). Many states, including Oregon, have included an identical or substantially similar provision in their own Rules of Civil Procedure. See Or. R. Civ. P. 16(C) ("Inconsistent claims or defenses are not objectionable . . . . A party may . . . state as many separate claims or defenses as the party has, regardless of consistency and whether based upon legal or equitable grounds or upon both."). Despite the rules permitting pleading of alternative claims for relief, plaintiffs who request both legal and equitable remedies based on the same conduct by the defendant often face an early motion to dismiss the equitable claim on the theory that equitable relief ordinarily is not available when the claimant has an adequate legal remedy. The Oregon Supreme Court, sitting en banc, considered this "shibboleth" in a thoughtful opinion rendered in Evergreen West Business Center, LLC v. Emmert, 323 P.3d 250, 252 (Or. 2014) (en banc).

          In that case, the plaintiff was a limited liability company that looked to the defendant, one of its members, to save its property from foreclosure by a lender. The defendant did so, but by buying the loan and associated encumbrance for his own benefit for about $614,000. The defendant then foreclosed on the property himself, bought it at a foreclosure sale with a maximum credit bid, and then encumbered the property with a $900,000 loan from a different lender. The plaintiff sued the defendant for breach of fiduciary duty, seeking in separate claims alternative forms of relief: either damages or a constructive trust on the property. The plaintiff alleged in both claims that the property had been worth almost $1.4 million when the defendant wrongfully acquired it for himself. At the plaintiff's request, the trial court instructed the jury on the damage claim that if the defendant breached a fiduciary duty owed to the plaintiff, the plaintiff "is entitled to any profits made by [the defendant] as a result of the breach." Id. at 253. The jury, apparently not believing that the defendant profited from his breach, awarded the plaintiff actual damages of $1 and punitive damages of $600,000, which were reduced to $4 by the trial court. The trial court then offered the plaintiff the choice between a money judgment for $5 or a constructive trust. Not surprisingly, the plaintiff elected the constructive trust. The defendant appealed, arguing that the plaintiff was not entitled to a constructive trust remedy, because it had an adequate legal remedy in the form of the jury's award of damages.

         The Oregon Supreme Court disagreed, concluding that the plaintiff was indeed entitled to elect the constructive trust remedy. With regard to the timing issue, the court held that "[t]he doctrine of election between inconsistent remedies does not require an election before the entry of judgment. A party need only choose between or among inconsistent remedies, not inconsistent claims or theories of recovery." Id. at 260 (citing Or. R. Civ. P. 16(C)). Thus, the plaintiff only had to "elect its preferred remedy before the entry of final judgment," id., which means that alternative legal and equitable claims properly pleaded by a claimant should be permitted to survive a motion to dismiss and proceed through trial before an election is required. On the main issue, the court rejected the argument that the plaintiff was not entitled to elect the constructive trust remedy because the jury's award—even though unsatisfactory to the plaintiff—was legally adequate so as to preclude any award of equitable relief. The court, while admitting that there was support for the argument in its prior decisions "holding that equitable relief is not available if there is an adequate remedy at law for the same breach or wrong," found that this principle was grounded in the old procedural distinction between law and equity that has largely been abolished in Oregon, as elsewhere in the United States. Id. at 256-57. As such, at least with regard to a choice of remedies for a breach of fiduciary duty between a money award and a constructive trust, the plaintiff could choose a constructive trust if necessary for the obtaining of complete justice, even though the law might also give the remedy of damages against the wrongdoer. In light of the jury's award of a mere dollar in money damages, "[o]nly a constructive trust would permit plaintiff to obtain the property that defendant misappropriated and to enjoy its benefit," id., which is the point of the constructive trust remedy, see id. at 255.

         The Evergreen decision provides a good basis for a plaintiff to argue that he or she is not required to choose between alternative legal and equitable claims based on the same breach or wrong at an early stage of the case. This may prove to be a considerable benefit both in developing the theories, which may involve different elements even if based on the same alleged misconduct by the defendant, and ultimately in choosing the more advantageous remedy if both are awarded.

    Topics: civil procedure, eqitable remedies

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